ESR News Blog

A class action complaint filed against a Consumer Reporting Agency (CRA) on April 16, 2012, alleges that the Defendant reported inaccurate criminal data obtained from an “instant” criminal record search without courthouse confirmation, and also that there was allegedly no notice to the consumer who was the subject of the search. The suit also alleges that such acts were in violation of the federal Fair Credit Reporting Act (FCRA) that protects consumers from inaccurate or irrelevant information and failed to meet the standard of accuracy and fairness mandated by the FCRA.

The Plaintiff claims that the Defendant – a CRA that collects consumer information and sells “consumer reports” that are also known as background checks – failed to meet the standard of accuracy and fairness mandated by the FCRA, which requires all CRAs that report criminal conviction and other information to employers adopt and implement procedures that “assure maximum possible accuracy of the information concerning the individual about whom the report relates.”

The Plaintiff claims that when she applied for a job, the CRA:

Reported to two different employers that used their “instant” database that the Plaintiff had been arrested and charged with felony offenses in Los Angeles County, but failed to report the felony charge had been dismissed and a misdemeanor conviction had been legally expunged;

Failed to provide timely notice that such information had been reported; and

Caused Plaintiff to be denied valuable employment opportunities.

Despite the requirements of FCRA, the complaint alleges the CRA:

Twice failed to notify Plaintiff contemporaneously of the fact that public record information about her was being reported;

Failed to maintain strict procedures designed to insure such information was complete and up-to-date; and

Failed to utilize reasonable procedures to assure maximum possible accuracy of the adverse information it reported to her potential.

The complaint also claims the CRA failed to ensure accurate and timely reporting of convictions and other consumer information due to a promise of instant results. According to the complaint filed in the Alameda County Superior Court in California:

Some or all of [Defendant’s] unlawful conduct is attributable to its promise of “instant” results, which are incompatible with the accuracy requirements imposed on credit reporting agencies by the FCRA. Plaintiff is informed and believes, and on that basis alleges, that rather than conducting an individualized investigation of a consumer’s criminal record at the time a background check is requested, [Defendant] responds to its employer clients’ requests on the basis of information collected in internal databases. This information does not and by definition it cannot include the most timely and accurate information, as the FCRA requires.

The complaint notes that individuals with criminal records have difficulties getting employment and rehabilitation is even more difficult when expunged criminal records are “illegally and incorrectly reported.”

The complaint indicated that because of the impact of the CRA’s wrongful practices, the Plaintiff is suing on behalf of consumers throughout the country who have been the subject of similar prejudicial, misleading, and inaccurate background check reports prepared by the Defendant. Since the suit alleges that the CRA’s non-compliance was willful, the Plaintiff and class members are entitled to statutory damages provided by the FCRA. Under FCRA section 616, the potential penalties for willful noncompliance can be $100 to $1,000 per victim, plus attorney’s fees and punitive damages.

“The mere fact that allegations are made is not evidence that any of the alleged acts occurred,” comments safe hiring expert Lester Rosen, founder and CEO of San Francisco-area based background check firm Employment Screening Resources (ESR). “The case has just been filed, and the judicial process can take time, so no conclusions can be drawn until and unless there have been factual determinations. However, the allegations do touch upon important issues.”

Rosen – author of a comprehensive guide to background checks called ‘The Safe Hiring Manual’ – explains that a background screening firm has separate obligations under the FCRA when it comes to reporting criminal records. First, as a general rule under section 607(b), a background screening firm “shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.”

In addition, if there is a criminal record likely to adversely impact employment, FCRA Section 613 requires that the background screening firm shall:

At the time such public record information is reported to the user of such consumer report, notify the consumer of the fact that public record information is being reported by the consumer reporting agency, together with the name and address of the person to whom such information is being reported; or

Maintain strict procedures designed to insure that whenever public record information which is likely to have an adverse effect on a consumer’s ability to obtain employment is reported it is complete and up to date. For purposes of this paragraph, items of public record relating to arrests, indictments, convictions, suits, tax liens, and outstanding judgments shall be considered up to date if the current public record status of the item at the time of the report is reported.

The impact, according to Rosen, is that background screening firm can send a letter notice if criminal information is reported to an employer. However, even with a letter, use of a database may not meet the general obligation of “reasonable procedures” if the database had stale information that was not updated.

“It appears that the single biggest source of allegations of inaccurate records comes from reporting database results directly to the end-user employer without taking steps to ensure the record is complete, accurate, and up-to-date and belongs to the consumer,” Rosen noted. “However, a great many screening firms do not report database hits directly until the information is confirmed.”

Rosen believes the fallout from reporting inaccurate criminal database information to an employer potentially creates a risk to the whole screening industry. The tremendous value of databases as a research tool is well recognized, he says, but if CRAs provide incomplete or inaccurate data directly to employers without vetting, it may well eventually cause a legislative over-reaction.

“FCRA section 613 does allow the so-called ‘letter-notice’ option, but that needs to be read in conjunction with FCRA Section 607(b) that mandates ‘reasonable procedures for maximum possible accuracy,’” explains Rosen. “Although the 613 letter option is part of the law, a CRA cannot ignore the general duty to proceed with reasonable procedures, which can mean that using a database that is inherently flawed by a failure to update, can potentially result in an FCRA violation even if a letter notice is sent.”

The bottom line, according to Rosen, is that the 613 letter option does not open the flood gates to allow a CRA to report anything that comes up in a database as long as a letter is sent to the consumer. If a CRA knows or reasonably should know for example, that a database is not updated, and reports it anyways, that could potentially be a violation of 607(b) even if a letter is sent.

“Any firm that sells instant database material directly to employers should follow this case closely, since it can have far ranging impact,” advises Rosen.

The case was brought on behalf of JANE ROE, individually and on behalf of all others similarly situated, Alameda County (CA) Superior Court, Case No: RG12625923. The Attorneys for the Plaintiff JANE ROE and the Proposed Class are Nance F. Becker and Christian Schreiber of Chavez & Gertler LLP in Mill Valley, CA; Devin H. Fok of The Law Offices of Devin H. Fok in Alhambra, CA; and Joshua E. Kim of A New Way of Life Reentry Project in Los Angeles, CA.

(NOTE: As a general rule, Employment Screennig Resources (ESR) does not publish the names of defendants in the ESR News Blog when there has been no factual determinations since a complaint is only an allegation, and a mere allegation does not prove any matter to be true.)

Employment Screening Resources (ESR) has always taken the position that criminal record data from a database is never reported to a client until it has been verified as being complete and up to date, which means a re-verification by current courthouse information, such as a court runner.

In addition, ESR also takes the position that under California law, the letter option cannot be used in California and that a background firm must use: “strict procedures designed to insure that whenever public record information which is likely to have an adverse effect on a consumer’s ability to obtain employment is reported it is complete and up to date. (California Civil code section 1786.28(b).

ESR is also a member of a group of approximately 170 Consumer Reporting Agencies (CRAs) called ‘ConcernedCRAs’ (http://www.concernedcras.com/) that takes the position that a database is only a research tool that should never be reported to an employer directly without further verification.